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Last week I attended the launch by Tim Costello of a new organisation, the Community Council of Australia. With typical eloquence Tim argued that the Commonwealth Government should establish an Office of the Third Sector.

I needed no persuasion of the need for governments to recognise the increasing importance of the multifarious not-for-profit organisations (NFPs) that comprise that sector. As a seasoned but retired public servant I was less sure of whether an additional bureaucracy was the right answer. On reflection I think it is, at least in the short term. I can see no other way to give teeth to voice.
The manifold failures of the home insulation program have served to focus the public mind on the importance of the manner in which public policy is delivered. Less visible to most people is the fact that the design of program implementation has been transformed over the last 15 years.

Most public services now require contracted providers for policy execution. Often Commonwealth programs are delivered, and need to be monitored, by State and Territory public services. Other programs, including around half of employment services, are delivered by private sector businesses. In the area of human services, delivery is mainly undertaken by NFPs which, by grant application or contract tender, win service agreements from governments.

The government has become the service purchaser, public servants have become contract managers and community organisations have taken on the role of providers. A market has been created for the delivery of public services. It is a place of opportunity and challenge. The scale of government transformation is incredible. In January a research report was released by the Productivity Commission on The Contribution of the Not-for-Profit Sector. It indicated that a total of $25.5 billion of funding went to NFPs in 2006-07 (more than 150% increase since 1999-2000). Most of that outlay was to buy or subsidise the delivery of public services.

As a public servant I was a strong supporter of this emerging symbiotic relationship between the public and ‘third’ sectors. I still am. Services can be implemented more cost effectively by organisations that care about those to whom they deliver. Yet the problems of the outsourced arrangements, although less stark than those epitomised by batts and foil, are no less challenging.

NFP deliverers feel burdened by a level of bureaucratic red tape far greater than is necessary for public accountability purposes. Micromanagement of their business by public servants stifles social innovation. Funding is often inadequate. There is a danger that community organisations, in the attempt to win government business, will end up undermining their distinctive mission and values. Their advocacy voice may be self-censored by a desire not to upset the governments who fund them.

It would be wrong to over-emphasise the problems. The recent Managing for Recovery report from the Centre for Social Impact, PricewaterhouseCoopers and the Fundraising Institute Australia indicated that 69% of NFP organisations thought that their relationship with governments was good or excellent. Yet one does not have to attend many NFP meetings to find that there are significant tensions in their contracted relationship with public services. Senator Ursula Stephens, as Parliamentary Secretary for the Voluntary Sector, has done a sterling job in negotiating a National Compact to govern the framework of the relationship. After 20 months public discussion it is to be released on 17 March. The problem is that too often such documents, full of fine sentiment and the rhetoric of partnership, quickly lose their ability to influence behaviour.

If collaborative governance is to be made manifest it will need more than good intentions. It will require forceful application and public scrutiny. NFPs need to be engaged at a higher stage of the public policy value-chain than is generally the case today. They need to be given the opportunity to contribute to the development of policy that gives rise to programs and to negotiate the administrative guidelines under which they will be delivered.

This is where Tim Costello’s cri-de-coeur is so powerful. An Office for the Third Sector, established in the Department of the Prime Minister and Cabinet, and sitting alongside the Cabinet Implementation Unit, would be able to ensure that improved contracting of government funded services will actually take place.

As the Productivity Commission notes, an Office of Not-for-Profit Sector Engagement (its preferred nomenclature) would provide confidence that a reform will actually be driven and enforced. It would recognise that Commonwealth government delivery depends as much on the expertise and commitment of NFPs, working at the street and community level, as it does on the line departments and operational agencies within the Australian Public Service, managed from Canberra.

Most important, an Office for the Third Sector would allow a rebalancing of the asymmetry of power which presently exists between government (as the service purchaser) and NFPs (as the provider). A more equal relationship will allow the brightest promise of contracted delivery – the generation of social and public innovation – to be realised. Without such administrative clout the quest for more effective policy delivery may end up delayed. That would be wrong. The time is now.

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